According to the RICS European Housing Review, the drop is more significant than other countries in Europe including Spain, where prices fell -27%, -14% in Italy and -11% in Germany.
However, RICS said that UK house price declines slowed during 2011 as the overall European housing market remained subdued.
It found that residential property saw overall prices fall by 1% in 2011, which places the UK on a similar footing to several other smaller European nations, although Germany, France, Switzerland and Norway all posted rises of 5% or more.
Ireland and Spain experienced the most significant falls, dropping 17% and 10% respectively.
Speaking at the European Housing Review in London, Michael Ball, Professor of urban and property economics at the University of Reading said:
“Real house prices in the UK have fallen by a third due to a combination of a weak housing market and general price inflation. This has been one of the largest declines in Europe and will help to underpin housing market recovery once economic growth picks up again.”
He added that a notable change across Europe since 2007 has been the dramatic decline in the number of homes being built.
“During this period, the UK saw a 42% fall in residential building permits being granted, roughly in line with the European average.”
He attributed the fall to the low demand for new build properties and lenders feeling disinclined to lend on new build.
Bob Pannell, chief economist at the Council of Mortgage Lenders told delegates that while government-backed initiatives such as FirstBuy and NewBuy will help the new build sector and first-time buyers, it won’t transform the housing market.
He told delegates that innovation remains key to help improve activity levels in the market.
“The early nineties actually triggered significant innovation in the mortgage space with the emergence of buy-to-let, the banks lending to people with less than perfect credit histories and creating a very active remortgage market which served borrowers well.
“We have both domestic and international mortgage market regulation which threatens to change the rules for lending on certain products and that could impact how much innovation we’ll see in the market this year and next.
“I’m not saying innovation won’t happen this year, but it will just be much more slowly drawn out compared to the 1990s and 2000s.”
Pannell added that with inflation falling, the housing market may see activity levels move upwards in H2.
“The squeeze that households felt over the last few years is beginning to ease and we may be in a situation towards the back half of the year where people will feel more confident as they have more money in their back pockets. This is likely to have a positive behavioural effect on the mortgage market.”
